Making homeownership achievable for youth

In Ugandan culture, homeownership for young people, just as for the population as a whole, is as much as essential for well-being as it is for their social status. One does not become a man or a woman until they have a home they can call their own in most of our societies.

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This need for social inclusion puts pressure on especially young people to own homes by any means necessary. However, for young people starting life away from the parental household finding and sustaining accommodation can be a major challenge because this specific demographic has challenges of accessing funds since a number of them are in middle to low income employment and have many social responsibilities such as raising children and looking after the extended family.  

According to experts, employment status, housing characteristics, income trends, and demographic descriptors are the homeownership determinants that affect the motivation for an individual to own a home. This is why even if homeownership is the Holy Grail for many people, many continue to live in rentals longer than they would have liked. Also, due to high mobility rates especially in search of employment, some youth choose not to tie themselves down to one address. But there are other young people that make homeownership a priority and are willing to achieve it by any means necessary.

Saving for my home
Joseph Opondo, 32, a social worker notes that, social attributes, financial stability, income status, job uncertainty, and awareness of the importance of owning a house are among the factors that reduce the home ownership motivation drive among youth. 

Opondo says his determination to become a homeowner was not just to have a roof over his head but to free rent expenses to meet his other needs. He got an opportunity to save towards his homeownership dream during a work trip. 

“When I traveled out for work, my a per diem was $300 (about Shs1,134,000).  I decided to live a very minimalist life while I was there and managed to save about $1500 (about Shs56,688,000),” he says.
When he came back home, he used some of the savings to buy a 50x100 plot of land and invested part of it in low-cost businesses with cash flow (chapati stalls, barbershops, mobile money).  With the income from his various investments, he set out to construct rentals. He built three units, moved into one and rented out the other two. Each three bedroom unit cost him about Shs70m from start to finish which took him a year to complete. Since he had cash flow from several investments, it enabled him to build without much hustle. He also saved on expenses by making bricks on site and monitoring the project himself. 

Opondo notes that since he has less economic pressure, he is saving up to buy another plot where he will construct his dream home. 

“My dream house should have a big compound and play area for the children, a basketball court, a swimming pool, a garden, a small orchard, and a chapel. I cannot achieve this now when my priority is to establish steady cash flow through strategic investments. Besides, I know from firsthand experience how expensive construction is.  It is not something you want to start without enough a steady income.  I am careful not to sink all my capital and savings in a project that will leave me financially constrained for a long time,” he says. 

Opondo voices sentiments expressed by a section of many youth who continue to live in rented homes.

They are caught between spending their savings to construct their own home or invest in various enterprises until such a time when they have enough money to embark on the project without budgetary issues. 

Rent to save
Jacob Mulera, 28, who lives in a rented home says for now he has chosen to invest in things other than his own home.  Mulera says with those investments, he will be able to save enough funds for a dream house time comes.  

“Right now I feel investing hundreds of millions of shillings in a home is not a smart move at my age, I would rather invest in other income generating activates that require less startup capital that home construction,” he says.

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According to some real estate experts, 30 percent of people between the ages of 33 to 40 interested in owning property end up actually buying. They however are unable to do so as they do not have enough money and neither do they have security to access funding from financial institutions. 

Constraints...Unemployment 

According to Allan Atuhaire, a bank relationship manager, most youths are unemployed and this makes it hard for youth to even think about owning a home. For those who are employed, the average income of employed youth is about Shs500, 000 per month. There is no way one can access property with that kind of income.

Davidson Bagambagye, 32, says owning a house would be ideal but affordable plots of land are far from town access leaving renting as the most viable option.
“Most youth have not yet gained enough influence in their professions to command a big salary payment to afford plots in prime locations of Kampala. So they are forced to set up construction projects far out of the city as they rent in prime areas,” he says.

Cost of living
Atuhaire adds that there is also a problem of high costs of living. When one cannot afford the property in the urban centers, they opt for areas away from the city. The costs spent on movements to and from Kampala end up escalating and there is no profit to their ownership rather than having a stable home. This forces the youth to instead rent from the city center to be able to easily access services.

Solutions...Financial institutions
Yunus Babuwaire, the Senior Manager, Personal Banking at Housing Finance Bank highlights says there is a mortgage payment plan of up to 20 years for both salaried people and self-employed people. These have different terms and conditions before acquiring a mortgage. According to Babuwaire, a mortgage is an agreement in which money is lent to a borrower, for home construction or purchase, buying urban plots or commercial property, using that very property as security. 

“We provide different housing finance solutions to cater to Ugandans in all income brackets including those in the diaspora. Our solutions range from purchasing land or incomplete houses to be able to purchase multiple units,” Babuwaire says. 

These include: Incremental loans, land purchase, home loans, multi-unit purchases, or construction equity releases renovation

Financial literacy
A number of banks are engaging in financial literacy seminars creating public awareness on the benefits and downsides of owning or renting houses. 

“With our flexible payment plan of 24 months and our coalition with various banks in Uganda, clients are able to pay for their apartments and enjoy their journey to homeownership without worry,” Adrine Asingwire, a sales manager at Universal Multipurpose Enterprises, a real estate firm says.

Cheaper services
Atuhaire says  some financial institutes have started creating house loans for both high and low-income earners. 

“This was not the case in the past when only high-income earners were able to access  housing loans. Currently, even someone with a local sales agreement is able to get finances for their house needs as low and Shs5m,” he says. 

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Commercial banks have also tried to reduce their interest rates which were higher before. Right now, one can get an interest of as low as 15.8 percent per annum on a mortgage. 

Government role
The government should create a policy to provide quality housing for the vulnerable demographics. The government should be able to create affordable apartments for the youth but currently, even government housing entities are playing in the same field as private real estate developers. 

“Government subsidised housing should cost around  Shs20m, and Shs30m to enable even low income earners a chance at owing a home, yet, the cheapest national housing apartment costs about Shs60m,” says Allan Atuhaire, a bank relationship manager. 

Yunus Babuwaire, the Senior Manager, Personal Banking at Housing Finance Bank recommends a review of the tax regime in the housing sector and its raw materials to make construction more affordable. He adds that a review on the tax regime reduces the cost of acquiring and owning a home. This can include reducing the high stamp duties and reviewing the rental income tax. He says that infrastructure also plays a big role in home ownership.

“Government can also improve infrastructure, road network, water and electricity supply which will, in turn, increase the suitability of more affordable land in places outside Kampala,” he says.